Virgin Atlantic could 'run out of money' by end of September

Andrew Cummings
August 5, 2020

Virgin Atlantic filed for Chapter 15 bankruptcy in NY on Tuesday, becoming the latest airline - and the second from Virgin Group - to file for bankruptcy protection, Business Insider reports.

Under the filing, the airline is not yet going into liquidation or going out of business.

Several airlines have been pushed to similar outcomes by the pandemic.

The Virgin Group airline filed for Chapter 15 bankruptcy protection in the Southern District of NY on Tuesday.

Virgin Atlantic Airways Limited, referred to as "the company" in written submissions, forms part of the Virgin Atlantic Group, which was referred to as "the group".

She added the "process is proceeding with the support of the majority of our creditors". Following the United Kingdom hearing held earlier today, ancillary proceedings in support of the solvent recapitalisation were also filed in the USA under their Chapter 15 process. These ancillary United States proceedings have been commenced under provisions that allow USA courts to recognise foreign restructuring processes.

"In the case of Virgin Atlantic, the process we have asked to be recognized is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006".

The filing comes after the airline spent a few months operating no passenger operations.

The airline began flying passengers again in July.

It is the second Virgin-branded airline to struggle this year. If that happens, Virgin Atlantic would be forced to sell slots at Heathrow, forcing it to shut down completely. It flies exclusively long-haul global routes, so it has faced tougher seas than other airlines as worldwide travel has significantly declined and countries have increased travel restrictions. These routes were hit by border closures and evaporating demand that severely impacted Virgin's financial state. Virgin Atlantic said that three out of four groups of creditors have already expressed their intention to back the rescue deal. In announcing its bankruptcy, the carrier said it will effectively run out of money in September, when its available cash will drop below the 75 million pound minimum cash requirement specified in bondholder contracts.

Giving up Heathrow slots would be an bad outcome for the airline.

Just hours earlier, Virgin Atlantic said during a court hearing in London that it would run out of cash next month unless a GBP1.2 billion pound (USD1.6 billion) rescue deal was approved.

The UK based airline is seeking for protection under chapter 15 of the USA bankruptcy code, which allows a foreign debtor to shield assets in the country.

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